Be Careful on Portability Election

A recent court case shows the perils of making an estate portability election

Photo by Sebastian Gómez on Unsplash

An estate is now allowed to make a portability election to “port” over the unused lifetime exemption from the first deceased spouse. This allows the second spouse’s estate a “combined” lifetime exemption to be used at their death.

Here is an example:

Jerry passes away in 2025 worth $5 million which is held in trust for his children. The remaining $10 million exemption is ported over to his surviving spouse Erica to be used when she passes. Let’s assume she passes away in 2030 when the exemption is estimated at $17 million. Her estate could be worth $27 million ($17 million plus the $10 million ported over exemption) and owe no estate tax. Without portability, she could only be worth $17 million and owe no estate tax.